Friday, 9 May 2008

Ill Omen for Energy Sector as Heating Oil Goes Bearish

Quietish week this time around in the trader positioning as reported in this afternoon's Commitments of Traders report. See how it all went down on my Latest Signals page. Some highlights:

- Heating oil has flipped to bearish. This trading setup is based on the large speculative funds, which have sharply reduced their net long futures and options position as a percentage of the total open interest. Heating oil is almost perfectly correlated with crude oil, so this could be a portent of things to come in the wider energy complex. The heating oil setup works with a six-week trade delay, which means execution of the trade would be for the open of trading on June 23.

- My crude oil setup is still long, but it works with a shorter four-week delay, so there's still time for it to go bearish in the same timeframe. Recall that we're getting close to the end of the yearly favourable seasonal energy play.

- My Canadian dollar setup, also highly correlated with crude oil, is giving a wobbly set of signals for the coming few weeks as trader positioning suggests a bearish patch. Have a great weekend, and good luck next week!

No comments: